Electric buses are expected to be at the forefront of India’s electrification drive, with the segment likely to witness healthy traction going forward, ICRA said. E-buses will account for 11-13% of new bus sales by FY25, the credit rating agency said in a note. “The traction in the e-bus segment is already visible over the past couple of years, with e-bus volumes as well as penetration levels improving consistently, to 7% in FY23. Steady progress has been made over this period towards meeting the e-bus deployment targets under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme, and this is likely to gain pace over the coming months, till the scheme expires in March 2024, it said. Additionally, many state electric vehicle (EV) policies have announced specific targets and timelines for e-bus adoption, thereby creating a roadmap for electrification, it added. “Bus cost is the single largest cost element in the e-bus project, accounting for 75-80% of the project cost,“ said Kinjal Shah, Vice President & Co-Group Head, Corporate Ratings, ICRA Ltd. “The capital subsidy of ₹35-55 lakh per bus under the FAME II scheme can fund a large part of the project costs, up to as much as 40%, which augurs well for the viability of these projects,” Ms. Shah said. “Additionally, coupled with the significant savings on fuel costs (3-5x cheaper vis-à-vis conventional buses), these subsidies help lower the total cost of ownership of e-buses by 10-25% compared with conventional CNG or diesel buses,” she said. In addition to these state policies and government schemes, the government has also sought to spur e-bus adoption through bid aggregation under tenders floated by Convergence Energy Services Limited (CESL). With the enhanced volumes under these tenders due to demand aggregation, there was healthy interest and participation by the original equipment manufacturers (OEMs) in the first two tenders, even without subsidies on offer in the second tender, ICRA said. However, CESL’s third tender saw limited OEM participation due to lack of a payment security mechanism and a dry lease model of operation proposed for it and had to be subsequently scrapped, it added.
